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EUR/GBP could hit 0.71 in 6-month – Danske Bank

FXStreet (Edinburgh) - Morten Helt, Senior Analyst at Danske Bank, expects the cross to test the area of 0.71 in a 6-month horizon.

Key Quotes

“EUR/GBP has been trending higher since mid-July driven by, among others, a more dovish stance from the Bank of England (BoE) and notably an increased focus on the weak near-term inflation outlook”.

“As inflation bottoms out and a BoE rate hike moves closer, we expect EUR/GBP to trade gradually lower over the medium term”.

“However, we still expect EUR/GBP to bottom out around the time of the first BoE hike as fiscal consolidation and political risks in the UK (EU referendum) are expected to weigh on GBP while the euro, to a greater extent, should benefit from fundamentals next year”.

“We have rolled our 6M and 12M forecasts slightly upwards to 0.71 (0.70) and 073 (0.72), respectively, but emphasize that the cross could temporarily undershoot our forecast around the time of the first BoE hike”.

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